Congratulations! You are now finally ready to begin that long-awaited project. You have been patient, planned your project, done your research, and located an awesome contractor who will become a part of your family for the next few weeks. Once you have chosen a contractor no work should begin on your home until you have received, reviewed, and signed a written contract. The written contract should spell out in detail exactly what will take place before, during, and after your project is complete. You need to be sure that everyone involved is thinking, talking, and working on the same page.
What is a Written Contract?
In dealing with home construction projects, a written contract is a legally binding document between you, the homeowner, and the contractor you hire. It specifies the work to be completed, the amount of money to be paid for the work, and the separate responsibilities that both you and the contractor must fulfill. A written contract is needed to ensure that all parties involved understand their obligations and to make sure that nothing is left open to an individual's interpretation. The written contract will also protect the homeowner against a dishonest contractor or one who does poor quality work. It also protects contractors and ensures that they will be paid in a timely manner. A contract is also the best tool for settling disagreements if things should go wrong and end up in a legal dispute. In short, do not ever start a project without protecting yourself and your home.
Minimum Home Construction/Repair Written Contract Requirements
Many states, by law, have specific minimum requirements for home construction written contracts...read and understand them! These requirements are often found on state or attorney general websites. In Maine, any home construction or repair project totaling more than $3,000 in materials or labor must be accompanied by a signed, written contract. By failing to use a written contract, as noted above, Maine contractors can place themselves in a position to commit an Unfair Trade Practice.
Note: Many written contract laws are not inflexible. A certain section of the state law may allow the contractor and the homeowner to agree to exempt themselves from the law in part or even entirely. However, in order to properly qualify for an exemption, the contractor must specifically inform the homeowner of the homeowner's rights under this law.
Below are 9 important items that should be in every written contract:
1. Names of Both Parties: This should be obvious but isn't always the case. The name, address and phone number of both the contractor and the homeowner is an absolute necessity.
2. Location: This is the physical address of the property upon which the construction work is to be done. So simple yet often ignored. Don't let this come back to haunt you.
3. Work Dates: This is the date the project will start and the estimated date of completion. Either or both of these dates may be changed if work cannot begin or end due to circumstances beyond the control of the contractor. This needs to be agreed to in writing and signed by both parties. This helps eliminate a contractor taking a month to do a project that should be completed in a week.
4. Contract Price: This is the total contract price including all costs to be incurred in the proper coB68mpletion of the project. A contract based on a "cost-plus" formula, which is the agreed upon price and an estimate of the cost of labor and materials, needs to be handled in its own way.
5. Payment: This is the method of payment, with the initial down payment being limited to no more than what the state law allows at that time. Many contracts include a down payment and then a percentage of the remaining cost is paid as the project continues. In Maine, the down payment is limited to one-third of the total project cost, unless waived and agreed upon by the homeowner and contractor.
6. Description of the Work: This is a general description of the work to be completed by the contractor and materials to be used. If the homeowner requests specific materials or products then it is advised that they be spelled out in the contract to avoid confusion.
7. Warranty: A warranty statement should state that the contractor ensures that his work will be free from faulty materials, constructed according to the standards of the state and/or local building code, and constructed in a skillful manner and fit for habitation or appropriate use.
8. Resolution of Disputes: This is a statement that allows the homeowner and contractor the option of resolving contract disputes using select methods. Potential options are:
Binding arbitration - an arbitrator is agreed upon and assigned to make any final decisions.
Nonbinding arbitration - either party can chose to ignore the arbitrator's decision and proceed with a lawsuit, if necessary.
Mediation - both parties agree to allow a mediator to help resolve their differences.
9. Change orders: A change order is a written agreement that both parties sign when any change is made to the original written contract.
Other provisions the homeowner might want to consider adding to the written contract:
Lien releases to ensure that you are not held liable for any third-party claims of nonpayment.
Details pertaining to access to your home, care of the premises, phone and bathroom use, cleanup, and trash removal. Daily start and stop times (unless you want them there for breakfast and to tuck you in at night).
Information on who will obtain and pay for necessary permits and other approvals.
Once presented with a written contract take the necessary time to read it thoroughly and ask questions if you don't understand something. Make sure everything you requested is on the contract BEFORE you sign it. And finally, NEVER sign a partially completed or blank contract!
Paul Lawrence has owned and operated Home Project Partners, a free Maine-based contractor referral service, since 2002. He helps bring homeowners together with re4E4liable, quality-conscious, pre-screened home contractors skilled in numerous trades. Paul makes presentations to realtors and other groups that have an interest in his service. He has also taught adult education classes showing homeowners how to find contractors on their own and to learn how to properly screen a contractor.
For more information contact Paul at info@HomeProjectPartners.com or visit online at http://www.HomeProjectPartners.com
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